Capital Account Controls, Bank’s Efficiency, Growth and Macroeconomic Volatility in the FLAR’s Member Countries?

Humberto Mora () and Hernan Rincon-Castro

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper evaluates the effects of capital account controls adopted in the past years by the FLAR’s member countries (Bolivia, Colombia, Costa Rica, Ecuador, Perú and Venezuela) on the efficiency of the banking sector, the economic growth and the volatility of output, consumption, and investment. The findings on efficiency show that the degree of the monopoly power in the loans and deposits markets are positively correlated with capital controls. The findings also indicate that, in general, capital controls neither reduce growth nor reduce macroeconomic volatility. On the contrary, and as it is expected, the capital account openness promotes growth.

Keywords: Capital account controls; Efficiency of the banking sector; Economic growth; Macroeconomic volatility; SUR; Cointegration; Arellano and Bond estimator; Instrumental variables (search for similar items in EconPapers)
JEL-codes: C51 C52 F32 F33 F36 F41 G14 G18 G21 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:364

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